1 PFLEIDERER AG NINE-MONTH FINANCIAL REPORT 2007

Consolidation methods
Acquisition accounting uses the purchase method, under which the cost of the interests acquired is
eliminated against the parent’s share of the subsidiary’s equity at the acquisition date. Any difference
is allocated to the assets and liabilities of the subsidiary up to the amount of the parent’s share of
their fair values. Any remaining excess of acquisition cost over the fair value of identified net assets
acquired is recognized as goodwill and tested regularly for impairment in accordance with IAS 36,
Impairment of Assets.
All receivables and liabilities, revenues, expenses, and income, as well as intercompany profits or
losses between the entities included in the consolidated financial statements, are eliminated in the
course of consolidation.
Minority interests are identified on the basis of the equity as of each balance sheet date and are
presented within equity in the consolidated balance sheet, together with the attributable shares of
profit and loss.
Use of estimates
Preparation of the financial statements for the first nine months requires management to apply certain
assumptions and estimates that affect the reported amounts of assets, liabilities, income, expenses,
and contingent liabilities for the reporting period. Such assumptions and estimates relate primarily to
the assessment of the impairment of intangible assets, the uniform Group definition of useful lives for
items of property, plant, and equipment, the recoverability of receivables, and the recognition and
measurement of provisions. The assumptions and estimates are based on presumptions that are
dependent on the current information available at the time. In particular, the assumptions applied to
the future development of business were based on the circumstances prevailing at the time of
preparation of the interim consolidated financial statements and on the future development of the
industry environment, which is presumed to be realistic. Developments in this environment that
depart from the assumptions made and that are beyond management’s control may lead to the actual
results varying from the original estimates. If actual developments depart from expected
developments, the presumptions and, if necessary, the carrying amounts of the assets and liabilities
affected will be adjusted accordingly.
At the time of preparation of the financial statements for the first nine months, the underlying
assumptions and estimates were not affected by any special circumstances such that, as things
stand today, it is assumed that no significant adjustments will be required in the coming quarters to
the assets and liabilities reported in the consolidated interim balance sheet.
Foreign currency translation
The financial statements of the subsidiaries of Pfleiderer AG for the first nine months have been
prepared in their functional currencies, which are generally their local currencies. With the exception
of equity, which is translated at the exchange rate prevailing at the transaction dates, all balance
sheet accounts are translated into the reporting currency (euros) at the closing rates. Income and
expense accounts are translated at the average rates for the reporting period. Any differences
resulting from foreign currency translation are recorded in a separate account in equity ("Other
comprehensive income/foreign currency translation") until the Group company is sold or otherwise
liquidated.
26 PFLEIDERER AG NINE-MONTH FINANCIAL REPORT 2007